ACC for Business

What is ACC?

ACC (Accident Compensation Corporation) is a government entity that provides no-fault accident insurance cover for everyone in New Zealand.

If you get injured in an accident, ACC will pay for your treatment and care, and will pay you compensation for loss of income if your injury prevents you from working.

You help fund ACC by paying levies, like insurance premiums.

ACC Levies

Levies are charged on money earned by individuals through personal efforts. This includes wages and business income but excludes passive earnings such as interest, dividends or rents.

The two main levies paid are work levies and earner levies.

Work Levies

Businesses pay work levies to fund ACC’s work account which covers work-related injury costs. Businesses pay a specified rate (percentage of their workers’ wages) which depends largely on the risk of its industry. Income from high-risk manual labour is levied at a higher rate than safer office-bound work.

Earner Levies

Individual workers pay earner levies to fund ACC’s earner account which covers non-work-related injury costs. The rate is the same for everyone, being 1.39% of earnings for the 2018/2019 year.

Employees earning PAYE deducted wages have earner levies deducted as part of their PAYE. This is paid by the employer to IRD who forward it to ACC.

Self-Employed

Businesses pay both work levies and earner levies on the income of self-employed and shareholder employees who do not pay PAYE.

When a business, whether it be a sole-trader individual or a company, files an income tax return, the amount of active income included in the return is passed by IRD to ACC. ACC then invoice the business.

New businesses will receive their first invoice after their first income tax return is filed.

ACC Invoices

When an employer pays PAYE deducted wages, ACC invoice the business for the work levy on those wages.

When a business has earnings with no PAYE deducted, ACC invoice the business for both the work levy and earner levy. For a sole-trader, this is based on the business income returned in the sole-trader’s individual income tax return. For a company, this is based on the shareholder salary information included in the company’s income tax return.

ACC charges provisional levies, based on expected earnings before the year is finished, and final levies based on the actual earnings after the year is done after adjusting for provisional levies already paid.

Injury Cover

ACC pay for treatment and other required care for injured people. They also pay income replacement of 80% of the injured person’s income, subject to a minimum and maximum amount, if the injury prevents the person from working. If an individual with a salary of $100,000 cannot work following an injury, ACC will pay them $80,000 until they can work again. The payments are subject to PAYE.

The employer must pay the employee the 80% for their first week off work. After that, ACC take over.

Minimum Earnings

A minimum income is set for fulltime workers for ACC purposes. If a worker earns less than the minimum, ACC levies and compensation are based on the minimum which, for the 2018/2019 year, is $32,760 per year.

Maximum Earnings

There is also a maximum income for ACC purposes. A worker will only pay levies, and receive compensation if injured, up to the maximum amount. For the 2018/2019 year it is $124,053.

The minimum and maximum amounts increase annually with inflation.

First Year of Business

If a newly self-employed person cannot work due to injury, they must prove their income to receive 80% of their actual earnings. This can be difficult if they are yet to file an income tax return. Until they convince ACC of their earnings, they will only receive the minimum cover. For new business owners, ACC’s Cover Plus Extra can solve this.

Cover Plus Extra

ACC’s standard cover discussed so far is called Cover Plus. Cover Plus Extra is an optional alternative that acts more like private insurance.

Under Cover Plus Extra, a self-employed person chooses a fixed level of income cover within an allowable range. For the 2018/2019 year, the minimum cover is $26,208 and the maximum is $101,029. These figures are based on 80% of the previous year’s minimum and maximum earnings figures used for ACC Cover Plus calculations.

Cover Plus Extra levies are fixed and compensation if injured is fixed. No proof of actual earnings is needed. This can be especially useful before the newly self-employed.

Some self-employed people choose the minimum income cover and use the money saved on levies to purchase other private insurance to top-up their cover. The private insurance could include other benefits such as cover for illness as well as accidents.